Rollout flops, marketing woes pin down Wendy’s

Filed under: Retail |

During the past 18 months, Wendy’s, the No. 3 fast-food chain, has faced challenges ranging from new product flops to marketing nightmares. Perhaps it’s still recovering from the 2002 death of a marketing icon, founder Dave Thomas, who appeared in more than 800 commercials.

Thanks to the rollout of its Frescata deli sandwiches, April was the first month during the past 14 that saw sales growth compared to a year earlier. While sales grew just 0.4 percent at stores open at least a year (known as same-store sales), the psychological boost for Wendy’s was huge.

Wendy’s has sold 20 million of its new Frescata deli sandwiches since April.

For years, Wendy’s was the burger chain to beat, with freshness and product innovation. Before 2005, Wendy’s racked up 18 consecutive years of same-store sales growth. Its market share began to fall in 2003.

To boost its confidence, Wendy’s has 70 potential products under development, including items for a breakfast menu. The breakfast launch is planned to go nationwide by mid-2007. The next biggest trial product will be the Vanilla Frosty.

With a costly breakfast menu in the works and $100 million in corporate cutbacks and layoffs coming — things may get worse before they turn around.

Albertsons to close 16 area stores

Albertsons’ new business strategy will result in the closing of two Albertsons stores in Colorado Springs and one in Security.

The strategy will focus on 52 Rocky Mountain Division food and drug stores in Colorado, Wyoming, Nebraska, New Mexico, and South Dakota.

Sixteen under-performing Albertsons and Grocery Warehouse stores in Colorado will be closed. The stores have been unprofitable for several years, and while they comprise 23 percent of the company’s Rocky Mountain Division food and drug stores, they account for only 13 percent of sales during the past year.

“Concentrating our resources on a base of solidly performing stores is key to our new strategy because it will allow Albertsons to be more competitive and better serve the community,” said Wayne Denningham, president of Albertsons Rocky Mountain Division. “This new business strategy will enable us to provide our shoppers better value and an enhanced shopping experience.”

Albertsons is working to place associates in nearby stores. All 16 stores will close within the next several weeks.

The impacted Colorado Springs locations include: 3970 Palmer Park Blvd., 1710 Dublin Blvd. and 302 Main (Security).

Safeway’s remodeled stores boost profits

Safeway Inc. CEO Steve Burd credits much of the company’s success to its capital improvement program. Since 2004, the company spent $1 billion annually on the program. This year it will spend $1.6 billion to build or remodel stores.

Burd said fiscal 2005 saw overall sales increase more than 7 percent, adjusted operating income increase by about 16 percent and earnings per share increase more than 17 percent.

Currently, 550 stores have been converted to or built in the “lifestyle” format – which features expanded product categories, including housewares, organic produce and grocery items, Starbucks coffee kiosks, and an array of upscale cosmetic touches like hardwood floors in produce departments, dark wood shelving and softer lighting.

He said virtually all of the company’s 1,772 stores in the United States and Canada would be converted to the lifestyle format by the close of fiscal 2009.

Burd said the new-format stores typically have sales 23 percent higher than remodeled Safeway stores.

May retail sales still full throttle for most stores

Higher gas prices didn’t appear to be a problem last month as consumers continued to shop at apparel stores and malls.

But low-income families are feeling the pinch of $3-a-gallon gas, leaving Wal-Mart with lower than expected sales for May.

Based on sales reports released by the nation’s merchants, Target Corp., J.C. Penney Co. and AnnTaylor Stores Corp. came out on top last month, while Gap Inc. and Sharper Image Corp. continued to struggle with their merchandising strategies.

The International Council of Shopping Centers sales tally of 52 retailers rose 4.1 percent in May, better than the 3.2 percent gain expected. May’s sales pace is in line with the 4.2 percent gain averaged from January through April.

U.S. department stores posted their highest sales gains since 1997, helped by weather that was warmer than in previous years. The sector averaged year-over-year same-store sales growth of 7.2 percent, according to ICSC’s index.

In May, drug stores led the way, posting an average increase of 8.4 percent. Sales at wholesale clubs rose by 7.2 percent. On a negative note, furniture stores saw sales decline by 6.6 percent.

Wal-Mart, reported a 2.3 percent gain in same-store sales. However, analysts had expected a 2.9 percent gain.

Meanwhile, Target had a 5.7 percent gain in same-store sales, better than the 4.8 percent expected.

For June, ICSC expects same-store sales to increase by 3 percent on a year-over-year basis.

Joan Johnson covers retail for the Colorado Springs Business Journal.